Filing my taxes. A bit complicated, but solvable. Thoughts appreciated.
February 16, 2017 2:08 PM   Subscribe

I need to file my taxes, but this is slightly convoluted (due to the Social Security Administration). Any suggestions would be great!

My taxes are fairly uncomplicated this year, on paper, anyway. It appears that I have to file employment (W2), SSDI [Social Security Disability Income] (1099), and deduct student loan interest (1098). That's all.

The rub? Social Security sent me a 1099 with the incorrect amount, and I was told they wouldn't be able to get a corrected copy of my 1099 to me by the tax filing deadline. Based on my estimates with the original and new, corrected 1099 form, I should be due a refund after everything is said and done either way. However, I don't completely trust SSA not to send me another incorrect form, especially one that may result in me having to owe money.

The attorney I'm working with (who has represented me in matters related to SSA) suggests that I either file now and then amend my taxes later, OR file an extension. So far, I am conducting all communications with SSA through this attorney.

The issues I'm having is:

a) I'm filing using Intuit Turbo TaxFree, which would be completely free for me to file. It seems that, to amend my taxes, I'd have to pay them a fee. I'm also unsure of if I would have to amend my DC taxes too, because DC doesn't tax SSA benefits, but I'm not completely sure how it all ties together. If I'm wrong about this, it'd be a great help to point me to the right information. It's a bit confusing to me.

b) I noticed that if you extend your filing deadline, in most cases, it's an automatic approval, but that you'd have to pay what you estimate you'd owe. As, as of right now, my estimated result either way (with the original and amended 1099) would be a refund, just in different amounts. This shouldn't be a problem, but I'm just afraid that SSA would end up giving me an erroneously amended 1099 that'd result into me owing the IRS money – and I'm afraid that, as theoretically I wouldn't be paying them at the tax deadline as I need to (even when filing for an extension), I'd end up in trouble, or owing interest on top of that.

I'm leaning towards just filing and then sending in an amended version, but I'm not sure how to do that for free, AND I'm also not sure if amending the state part would also be necessary, too. If all goes well with SSA, and the amended 1099 comes out as me and my attorney expects it to, then I'd be getting a bigger refund than with the original 1099, but I've had many bad experiences with SSA by now that I've learned not to trust them very well.

I'm sure I could find a CPA to help me sort this through, but maybe I'm overthinking this? I'm tight on money, so I'm not sure if I can hire a CPA. My income from work is $40k a year, if this helps.

Thanks so much! I would really appreciate any suggestions or clarifications. I hope everything I explained made sense – please feel free to ask me any follow-up questions. And, no, you are not my tax lawyer, and I do not expect tax law advice.
posted by dubious_dude to Law & Government (10 answers total) 1 user marked this as a favorite
 
If you extend or file and the SSA gives you another incorrect 1099, then you will have to continue what I'm sure must be a wearisome struggle to correct it--you won't immediately be required to pay taxes and interest and penalties. The important thing is to be sure that you know what the real amount is, because if you're wrong and you do end up genuinely owing taxes (or being due less of a refund), then it will cost you.

Sorry to ask kind of a dumb question, but...you're earning $40K a year W2-reported income and collecting SSDI?
posted by praemunire at 2:27 PM on February 16, 2017


Sorry to ask kind of a dumb question, but...you're earning $40K a year W2-reported income and collecting SSDI?

Not a dumb question at all! I was unemployed then got a job, but was put on the extended trial period, so I got SSDI for a couple months in 2016. The 1099 reflects that.

Are you saying that even if I don't extend, but file instead, and my refund becomes an amount owed, then I will still have to pay for that (interest, etc.)?

My attorney gave me an estimated figure that the revised 1099 will be lower than the 1099 I received originally, but I'm just afraid SSA will somehow mess it up. That may be me over-worrying, though.

I'm just not sure which the best option is to take.
posted by dubious_dude at 4:31 PM on February 16, 2017


I'm leaning towards just filing and then sending in an amended version, but I'm not sure how to do that for free, AND I'm also not sure if amending the state part would also be necessary, too.

"The Form 1040X, Amended U.S. Individual Income Tax Return, isn't accepted electronically; only an original tax return may be electronically filed. You must file Form 1040X on paper and mail it to the IRS."

Since you are getting a refund either way, I would e-file with the incorrect 1099 now. When you get the corrected 1099, then you will have to paper file that with the 1040X. TurboTax may be telling you they will charge you to fill out the forms and then you would have to print and mail them.
posted by soelo at 6:53 PM on February 16, 2017


An extension extends the time you have to file. It doesn't extend the time you have to pay. So if you extend and end up owing, you will owe as of April 15th, with interest.

I actually don't have full certainty on the answer re: filing. The IRS tends to take a very dogmatic 'it's owed on 4/15 no matter what' approach, but it appears that you will probably not be assessed a penalty if you acted with reasonable cause and in good faith in relying on a document such as a W2 (or, presumably, a 1099). (26 CFR 1.6664-4) It's not automatic, though.

If I was quite confident in my own calculation of the amount I'd earned, I'd probably go ahead and file to get at least part of the refund I knew was coming.
posted by praemunire at 7:30 PM on February 16, 2017


I actually don't have full certainty on the answer re: filing. The IRS tends to take a very dogmatic 'it's owed on 4/15 no matter what' approach, but it appears that you will probably not be assessed a penalty if you acted with reasonable cause and in good faith in relying on a document such as a W2 (or, presumably, a 1099). (26 CFR 1.6664-4) It's not automatic, though.

What I meant when I said "automatic" was that in most cases, approval of extensions are automatic/approved without question. That's what I read online.

Are you saying that if I extend my filing deadline and don't file with my original 1099, that even if I were owed a refund either way, I'd still lose some of that refund money due to extending?

then you will have to paper file that with the 1040X

Gotcha. I'll need to do the 1040X myself, then, I guess. Were I to receive a revised 1099 from SSA, would I need to amend my federal tax, or both my federal and state taxes? As mentioned in my original question, it doesn't appear that DC tax SSA benefits at all, so that'd be the only reason I'd be amending my original return, for the federal side.

Sorry for the threadsit/questions. Would any of you recommend a good CPA for low-income filers like me? I'm $40k per year, which IS low-income in the DC area.
posted by dubious_dude at 8:07 PM on February 16, 2017


Are you saying that if I extend my filing deadline and don't file with my original 1099, that even if I were owed a refund either way, I'd still lose some of that refund money due to extending?

No, I'm just saying that if you extend, you aren't getting any refund until you file. I personally would rather file on time and take the $X-100 I'm due now, then file the amended return and get that $100 when I get the corrected form. The IRS won't be paying you any interest on your refund if you get it later.

I don't feel competent to advise you about DC taxes. As a general rule, one doesn't have to report payments received that are excluded from income. But there are always nuances.
posted by praemunire at 8:28 PM on February 16, 2017


I went looking for VITA (Volunteer Income Tax Assistance) in DC, and it appears the income limit is lower in DC than it was in PA where I volunteered a few years back. I found this webpage though which lists two different free self-filing options. You could check out the non-TurboTax option to see whether it also charges for amended returns. Or just resign yourself to filing the amended return "by hand" yourself--I have done so before, on a simple return during college when I received a late tax form.
posted by serelliya at 12:31 AM on February 17, 2017


This page from United Way of the National Capital Area says the limit is $54K. Several places take appointments and some walk-ins as well. I volunteer for VITA and for our location, the income limit is more of a guideline than a hard rule. If you have 2 forms of income and one deduction, we would probably be able to file you return. Be sure to bring as much documentation as you can to your appointment, including your id and social security card.
posted by soelo at 8:48 AM on February 17, 2017


Seems to me, the simplest thing is to just file for an extension. You can wait until April 15th to do so. If you are sure about the incorrect 1099, just file your extension using the tax you would be expected to pay or no tax if you are due a refund. You can use the figures from your tax software, inputting the correct 1099 amounts to calculate your tax on the extension form.

Filing for an extension is a very simple one page form. The final deadline for your tax return is October 17 this year. You should have you corrected 1099 by then. And since you will eventually be filing just a regular tax return instead of an amended return, you can use your free tax software.

You will have to check the rules for your state requiring an extension but it is usually similar to the federal extension.

And what's the worst that could happen? Let's say you wait six months until October to file. Currently the penalty and interest is about 0.8% per month of your underpayment if you end up owing. That's less than 5% for six months. So if you ended up owing $1000, that's only a $50 penalty.

So it's easy. File for the extension. Pay tax if you think you owe or not if you don't. Wait for the corrected 1099 to show up. Then file your normal tax return.
posted by JackFlash at 3:54 PM on February 17, 2017


Hi -- I'd honestly file with the extension. You would have six months to get the corrected 1099, and by then everything should be sorted out. The penalty would be minimal, and my experience with the IRS is that they are very willing to reverse penalties if the taxpayer is ready and willing to work with them. I am licensed to practice in front of the IRS ("licensed" meaning I get to call their practitioner priority line) and as long as you're very, very nice to them and don't get snippy, they are more than happy to help you out, even if you don't have an attorney working with you. They're starving for affection there, they are understaffed, and when someone is nice to them, it's like a flower opening to sunlight. It's a pain to call them and wait on the phone, but in the end it usually all works out. So my suggestion would be, file the extension without paying what you owe since you technically don't owe anything (it should allow you to override the TurboTax software), get the corrected 1099, and wait to file the corrected tax return. Good luck!
posted by LawChick at 4:55 AM on February 22, 2017


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